November 3, 2004

Is Anyone Left in the Middle Class?

This article originally appeared in the November 3, 2004 issue of the St. Petersburg Times and the Omaha World-Herald, and the November 7, 2004 issue of the New London Day.

Throughout this year’s presidential campaign, both candidates have claimed that they would do more to help the “middle-class,” but neither one has defined who that middle-class really is. Here’s a news flash to both candidates: Ozzie and Harriet – the stereotyped single-earner family of the 1960s – retired years ago and are living comfortably in a golf course community in Sun City. The new middle-class is not our father’s middle-class. They are the roughly 32 million dual-income working couples in America today – particularly married professionals working in high-cost urban areas.

Because today’s families have two incomes, they no longer reside in the statistical middle of the income scale (those taxpayers earning between $25,500 and about $42,000 per-year). On the contrary, they are – at least on paper – the so-called rich. They pay the lion’s share of the income taxes and, as a consequence, reaped the lion’s share of the Bush tax cuts.

The mistake in focusing our attention on the statistical middle 20 percent of Americans is that this group no longer resembles most people’s image of middle America. While our father’s middle-class may have been clustered in this income group, today’s working families are not. Only 18 percent of married couples today are in this statistical middle, while more than two-thirds are found in the top two income groups. The largest share of married couples – 35 percent – earn enough to be in the top 20 percent of taxpayers, which begins at roughly $68,000.

So who is in the statistical middle today? They are right out of the cast of the long-running TV show “Friends.” Nearly 57 percent of taxpayers in the statistical middle are single or single parents with children. Joey may be a stereotype, but it is not of the nuclear family.

In contrast to this growing number of middle-income singles, nearly nine out of ten taxpayers in the wealthiest income groups are married – most of them dual-income. It does not take a rocket scientist to understand that when you have two incomes in a family, they will look twice as rich as a household with only one income.

Over the past 15 years, the number of dual-income working couples has grown by more than 7 million. According to the latest Census figures, 67 percent of working age couples are now dual income. When two single workers get married, they quickly move from the statistical middle to the so-called “rich.”

A young factory worker earning $17 an hour – or $35,000 per-year – clearly falls in the statistical middle. But if she marries a man earning the same amount, their combined income of $70,000 thrusts them up into the wealthiest 20 percent of Americans. Thus a family can have two middle-class jobs with two middle-income salaries, but be considered “rich.”

Because so many of these dual-income working couples are in higher tax brackets, they naturally pay most of the income taxes today. Remarkably, married couples in the wealthiest quintile account for just 17 percent of all tax returns, but they pay a whopping 72 percent of all income taxes. Considering that tax burden, we should not be surprised that these “upper-income” married couples received 60 percent of the Bush tax cuts.

The middle-class has not lost ground, it has simply changed its composition. And we need to change our traditional notions of who is “rich” and what it means to be “middle-class.” Middle-class is a value system, not a point on the income scale. If we define the middle-class as intact, working couples raising the majority of children in America, then the vast majority of the Bush tax cuts benefited their intended target. These families just happen to be statistically “rich.”

Scott A. Hodge is the president of the Tax Foundation, a non-partisan research organization in Washington, DC.